Mining shares boosted by new China support - London Report

MINING stocks helped Britain’s top share index rebound yesterday after China moved to support stuttering growth in the world’s biggest consumer of metals.

The FTSE 350 mining index rose two per cent, the top sectoral gainer, after China cut the amount of cash that banks must hold as reserves.

The blue-chip FTSE 100 index closed 0.8 per cent higher at 7,052.13 points, partly recovering from a 1.3 per cent drop on Friday. While it climbed back above 7,000, it remained about one per cent off a record high touched in the previous session.

“Mining stocks are sensitive to macro developments in China and the policy easing ... should help the sector, given that the country is trying to stimulate demand,” said Robert Parkes, equity strategist at HSBC. “We are positive on this ‘deeply unloved’ sector as valuations are quite attractive and we believe that large international funds still have pretty significant underweight positions on miners.”

BHP Billiton, Rio Tinto, Antofagasta and Anglo American rose 2.0 to 2.7 per cent.

Following Friday’s fall, gains were broad-based, with other growth-sensitive sectors like banks and oil and gas rising 1.3 per cent and one per cent respectively.

However, the FTSE 100 lags some major European indexes including Germany’s DAX and France’s CAC – both up more than 20 per cent this year against a seven per cent rise for the British index – before the General Election on 7 May.

Opinion polls put the governing Conservatives neck-and-neck with the opposition Labour party, and the Scottish National Party may emerge as the third biggest, raising prospects of a hung parliament. The ruling party has promised a referendum on Britain’s membership of the European Union by the end of 2017.

“A minority government will heighten uncertainty over how successful the government will be in pursuing its policy agenda and how long the next parliament will last. This will lead to higher risk premium for UK assets and an uncomfortable increase in volatility,” Bill O’Neill, of UBS Wealth Management, said in a note.

“In order of importance: a referendum on EU membership, fiscal policy and devolution will be the key concerns for the markets.”

Among other sharp individual movers, InterContinental Hotels Group rose 2.4 per cent, with traders citing merger chatter.